Juggling Dynamite

El-Erian makes good points on the need for transparency and stability in public markets, and on the risks to capital coming from the Fed’s shift away from QE (even though the economy is weakening), bad market technicals, and the flight of “tactical money” that can hurt dedicated, long term investors in those same markets.

Mohamed El-Erian, CEO and co-CIO, PIMCO, says it’s important to draw lessons from yesterday’s Nasdaq debacle. He also addresses the “wedge,” and whether the underlying economy is strong enough to withstand its removal. He also addresses the current situation in Egypt and the Middle East. Here is a direct video link.

Over the past 3 years, bank profits soared as they were able to set aside mark to market accounting and lever up ‘money for nothing’ from the Fed. At the same time revenue in other sectors and the real economy weakened. Taking out financials, S&P 500 earnings growth in the second quarter was negative, down 1.2%. But bank earnings are now also in retreat as the traditional legs of their business model have weakened with anemic trading volumes, slumping loan demand, increased regulation, growing legal battles, and now– the prospects of less free money from the Fed. We should make no mistake, the too-big-to-jail banks will be back looking for bailouts from taxpayers when the next wave of price discovery hits.

Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group, talks about yesterday’s shutdown of the Nasdaq Stock Market, regulatory probes of U.S. banks and the outlook for Ben S. Bernanke’s successor at the Federal Reserve. Here is a direct video link.

MONEY FOR NOTHING: Inside the Federal Reserve is an independent, non-partisan documentary film that examines America’s central bank from the inside out – in a critical yet balanced way. Here is a direct video link to the trailer.